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Tuesday, May 13, 2014

Seeing Future in Fuel Cells, Toyota Ends Tesla Deal

As reported by the NY Times: Toyota said on Monday that it would allow a battery-supply deal with Tesla
Motors to expire this year and would focus instead on building cars
running on hydrogen fuel cells, a next-generation technology that rivals
Tesla’s all-electric systems.

Toyota Motor invested $50 million in Tesla to acquire a 3 percent stake in the Silicon Valley upstart in 2010, and signed a $100 million joint-development deal
in 2011 for a version of Toyota’s RAV4 crossover sport utility vehicle
that carried Tesla’s electric powertrains. At the time, the two
automakers suggested that the RAV4 electric vehicle could be the start of a wider collaboration.

But
the electric RAV4 has sold poorly, despite low-cost lease and loan
offers Toyota introduced last year to promote sales. And Toyota has
increasingly signaled that it sees fuel cells as the most viable
zero-emissions technology, putting it at odds with Tesla, an evangelist
for electric-vehicle technology. Toyota is also the world’s biggest
manufacturer of gas-electric hybrids.

Toyota
said in an emailed statement that it was “re-evaluating” its RAV4
electric vehicle, and that Tesla’s supply agreement for the model would
“conclude this year.” Toyota said that its contract had called for Tesla
to supply 2,500 battery-electric powertrains for the RAV4.

The
Japanese automaker said its focus this year would instead be on its
four-door sedan powered by hydrogen fuel cells, which it plans to
introduce in California next year. The automaker will also focus on
developing hydrogen refueling stations to support fuel-cell technology,
it said.

Tesla said Friday in a regulatory filing that it expected the supply deal to end this year. Toyota said it would keep its stake in Tesla for now.

“It’s obvious Toyota doesn’t see a market for electric vehicles,” said John O’Dell, green-car analyst at the auto-research site Edmunds.com. “They really see the future of the zero-emission vehicle as the hydrogen vehicle,” he said.

“In
partnering with Tesla, there might have been a message there that
Toyota was looking at the possibility” of a wider partnership with the
Silicon Valley manufacturer, he said. “But they can’t even give these
cars away. Why continue doing this?”

The
winding down of the supply deal comes just four years after the two
automakers announced their partnership to much fanfare, in May 2010,
when Tesla bought an assembly plant in Fremont, Calif., that Toyota had
closed.

The
plant had been the site of a joint venture between General Motors and
Toyota. But G.M. ceased production there during its bankruptcy and
restructuring in 2009, and Toyota closed the factory a year later.

In
return, Toyota agreed to buy $50 million of Tesla common stock and said
the companies intended to cooperate on the development of “electric
vehicles, parts and production-system and engineering support.”

That
came as a surprise to analysts, as Toyota executives had long talked
down the all-electric car in favor of the company’s own gas-electric
hybrid technology, which cost the automaker millions of dollars to
develop.

And
yet as momentum built in recent years around all-electric powertrains,
Toyota was increasingly criticized for lagging behind in a crucial
automotive technology. In 2010, Nissan released the Leaf, which it
billed as the world’s first mass-produced all-electric car. General
Motors followed with its plug-in Chevrolet Volt.

Toyota, for a time, appeared to be hedging its bets. In a joint news conference
with Tesla in 2010, Toyota’s chief executive, Akio Toyoda, said the
market had not yet chosen the best low-emissions technology. He said the
company was preparing for all options.

“When customers do give us their answer,” Mr. Toyoda said, “I want the company to be ready.”

Toyota
introduced its own all-electric vehicle in 2012, a car based on its iQ
ultra-mini compact that the automaker developed independently. But
Toyota has limited sales of that car to fleet customers. At the same
time, electric vehicles have struggled to reach the mass market,
hindered by consumer concerns over their range and high cost.

Alec
Gutierrez, senior analyst for Kelley Blue Book, said he did not see the
deal’s end as a tremendous blow to Tesla. The boutique automaker would
just shift its attention to the Model X sport utility vehicle, he said,
which it is set to sell next year. Still, it came as a disappointment,
he said.

“There
was a hope that this would have taken off and that Toyota would plan a
mass-market vehicle,” he said. “But now they’re heading in two different
directions.”

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I have more than 25 years of experience in development, design, and mobile communications products and technology. I also enjoy skiing, hiking, scuba, tennis, reading, traveling, foreign languages, and painting. I'm an active member of the National Ski Patrol (NSP) and volunteer my time at either Loveland Ski resort, or Ski Cooper.